Warrior Trading Blog

How to Day Trade Breaking News

How to day trade breaking news

What’s up everyone? All right, so in this episode I’m going to break down how to day trade breaking news and I had a perfect example of it today.

A stock pops up. I’m going to show you the headline, the live trading recording, the initial marker response, me jumping in, the first pullback, riding that momentum and taking profit on the way up. Three minute long trade over $1,500 of profit.

Now this is a stock that has ended up coming almost all the way back down. It were traced the entire move and that’s not uncommon with breaking news headlines. Sometimes the initial market response is really dramatic and then things kind of settle down as investors and traders kind of really circulate and better understand the news. That’s why it’s always important when you’re trading these, that number one you understand how much you’re risking on the trade.

On this trade, I was risking $700. My profit target a thousand to 1500. Ended up getting that, which means I was risking 700 to make 1500. That’s a two to one profit to loss ratio, which means if I’m right, only 33% of the time trading that setup, I’m breaking even. So if I’m right 50% of the time or 60% of time or 70% of time I’m making a lot of money. In fact, you’ll see today that I’m up over $11,000 on all my trades across the board. Today was a really solid day in the market.

Now as you’re watching this episode, you might have a couple of questions about risk management, about stock selection, scanners, flow, breaking news. So if I don’t answer all of them in this episode, what I want you to do is click the link right in the description to register to my next live webinar. I think that will help get some of those questions answered and of course you can leave questions right down there below in the comments. And if you enjoy these videos, I hope you are already subscribed to the channel, but if not, hit that subscribe button.

How to Day Trade Breaking News

All right, so let’s get into it. Let’s start talking about how to day trade breaking news. All right guys, so this is kind of funny because literally yesterday I was telling myself I should make an episode, a video on how to day trade breaking news.

I was like, “Man, it’s been kind of a while since I had a really good breaking news headline that I traded.” So I was like, “Well, I guess I’ll just have to kind of stay on the lookout for one and maybe if it comes up, hopefully I’ll be recording and I’ll trade it and everything else.”

Boom, today, breaking news on NBEV and I traded it. Now, I’ll preface this by saying that basically every day I am trading breaking news because when I trade a stock that’s on this gap scanner here, this stock dare for instance, or this stock ADAP.

This stock ADAP is right here, it’s our second leading gapper up 45% this morning with 275% gain as of right now. It had breaking news, but I wouldn’t really consider this to be trading breaking news because the news was out hours beforehand. I was more jumping on the momentum once the market opened.

Breaking news I would to be more like this trade on NBEV where the stock was doing nothing, absolutely nothing. And then all of a sudden is doing something incredible, right? That is more typical of breaking news. So this is what I’ve got a really good example of today.

So NBEV is the stock. Let’s go back. Let’s see, I’m going to pull this up on my chat room feed here so I can show you guys the news as it posted in the room.

All right, so here we go. All right, so this is our chat room software and news desk is this proprietary newsfeed that we have that API’s. So the news is posted right into the chat room.

NBEV Breaking News

So news desk posts NBEV that’s the stock symbol. Kendall Jenner’s diet includes new age beverage brands. She told E! News that she drinks this to start her day every morning. And that was in a tweet. NBEV was a tweet from the company.

All right, so we’ve got a tweet from the company that Kendall Jenner, I don’t know if it’s… It sounds like a little bit of an informal celebrity kind of a promotion there or maybe it’s formal, I don’t know. But in any case, paid unpaid, I don’t know. All I know is that when I pulled it up, the stock was already hitting a dollar and 96 cents.

So I’m going to bring this down to the ten second chart because this is such a fast moving tray that I ended up taking. All right, so I pulled it up and it was right around here. Actually, it was right around here. And let me pull up my live trading recording for you as well. Let’s see. And I will break this down. Hold up. Let me just get this. All right, so there we go. Okay. All right, and we’ll pull this up right here.

NBEV currently it’s back at a dollar 87 88. So it’s kind of like, one of the things I say with trading a lot is we don’t want to marry these stocks and you don’t want to get emotionally attached because they will let you down.

These are stocks that you want to be actively trading. You want to get in, get your profit and get out. Sometimes these stocks will continue higher like ADAP and of course you think, “Oh man, I should have stuck with it longer.” But more often than not they do this. And so one of the things we also say as a trader is you don’t go broke taking profit. You take money off the table and every single day when you’re trading, you are doing one of two things. You are either giving back money to the market or you are walking away with profit and potentially leaving a little bit of money on the table.

Look at this. This just dropped from, what was that $5 to 468. I would rather walk away knowing that I did a great job. Maybe I’m leaving a little money on the table, but I feel better walking away with profit than let’s say giving back half my gains because I overtrade the market. So on NBEV I think I sold it a little too soon. I left a little money on the table and well, you’ll see this here. All right, so let’s go back. So we’ve got the news headline right here, Kendall Jenner, blah, blah, blah. All right, so I see that I pull up the stock and as soon as I pulled it up and saw that it was already up this much, I started pressing the buy button.

So I bought in thousand share increments 97, 98, 99, 99. Now the thousand share increment, you could just as easily change this to anything else under your share size settings. I have my custom orders here for buy a thousand shares. It’s probably worth changing this. I did a small account challenge and as I was preparing for that, I put myself into bootcamp where I could only trade with 2000 shares.

But I haven’t changed it since then. So I don’t know. Whatever. I’ve been on a good hot streak, kind of don’t want to change what’s been working. In TD Ameritrade, I would have typed in NBEV just like this and then I would be able to either click this for a thousand shares or 500 and then click the buy market button.

That’s the easiest way to jump in here. Okay. So NBEV it’s surging up and I go ahead and jump in it. So I’m now in it right now and as you can see I actually added at $2 and 6 cents. So I was kind of adding as it’s moving higher. And now it’s at 2.18 up to 28% and it’s got 1.9 million shares of volume, almost 2 million shares. And you know it’s not a stock that I trade a lot. You can see NBEV hitting the scanners here. It’s got 71 million share flow. Now the float is the number of shares available to trade and if you’re not super familiar with that, you can watch a couple of my other videos or click down below. There’s a link to register to one of my workshops where I’ll teach you about float and how I qualify a stock for having the potential to have a home run trade.

NBEV, I was a little skeptical. I know it’s a stock that sometimes a little bit more thickly traded. So up here when it starts to kind of run into a little resistance at 2.18, 2.19 I kind of was like, “Oh, let’s see what this does.” So there’s 2.23 and then it flushes down here to 1615 1413 and I was like, “Oh, oh.” It even hit 2.11 there for a second. So I ended up taking some profit off the table. I thought that maybe this is going to come right back down to two and hey, I better just walk away with some profit.

So I took some profit off the table. It ends up holding this level of 2.11 bouncing back up. And on the ten second chart here, it’s actually forming a micro pullback just like did right here. So the high is around 23. So over 23 old make new highs.

Note that it’s just a strong volume. The time in sales, which is this here in green is just showing so much strength. So, and then just like that, it’s up to 29 by 34. So now I’ve got a little bit of FOMO because I’m thinking, “Man, I sold 5,000 shares at 2.13. If I’d held that to 2.33 I would’ve made an extra $1,200 at the same time had it come right back down to two, I could have been getting out break even for the whole trade or even potentially for a loss and that’s not acceptable.”

So on this trade, I left a little money on the table, but I’m walking away with profit. So it’s squeezing up. You can see this red L-U-L-D right here at 34. That tells us that if it hits that level and holds above that level, the stock will get halted on circuit breaker. So L-U-L-D is right here. It has to stay. The bid price has to stay above this level for at least 15 seconds for the stock to get halted. Again, if you’re not familiar with the circuit breaker halts or things like that, make sure you register to my webinar. It’s really a day trading one-on-one where I break down risk management, stock selection and chart patterns.

So this pattern right here is a micro pullback buying the first candle to make a new high. Now I was already in from down here, so I just held through the pullback. All right, so now we’re at 34 and you can see I’ve got a $1,294 and 99 cents of unrealized profit, open P&L and I’ve already locked up 700 bucks. So right here as it starting to look like it’s not going to halt, I start to get a little nervous and think, “You know what? I better take a little more off the table.” The hot level has moved up. Hot levels are based on the stock moving 10% in the last five minutes, and so the average price of the last five minutes is always changing.

As time moves forward, the average price is different and so it’s always 10% above the average price. I’m sorry. Actually it’s 20% in the case of this stock. So there you get a quick drop. I sold some at 30 and I’m feeling grateful that I did that. Now we’re down at 17 or 19. And I’m going to end up scaling out of this and taking my profit off the table and walking away with about $1,500 which isn’t bad for three minutes of work.

However, I will tell you that when you trade breaking news, the biggest challenge and this kind of like what comes first, the chicken or the egg. You know what comes first, the news or the stock moving. Now obviously the news comes first. The stock’s not going to move without the news, but if you’re the first person to get breaking news, what do you do with it?

Because you don’t necessarily know if the market will interpret that news positively or negatively. And certainly something like a social media tweet related to a celebrity kind of sponsorship type of thing or whatever it is. You would typically think that would be received positively. But there are other headlines that you’ll sometimes see FDA approval or patent result or something like that that the market just doesn’t really respond to. So rather than searching all day long for breaking news, which every minute of the day there’s a news headline coming out. What I wait for is a stock to respond to it, and then I know that the market is interested.

And so I waited for the stock to respond and then I bought on the first pullback with a tight stop. All right, so when I was in here at 98 or 95, 96, 97, 98, my stop was at 89. So I was using about a seven 8 cents stop, risking about seven $800 for a total profit of 1500.

That’s a two to one profit to loss ratio. I’ll risk a hundred to make 200. I’ll risk 700 to make 14, 1500. That’s my risk management philosophy. So on this one it ended up working out really well, but there are certainly times where you’ll see a stock that has breaking news that you might think is positive and then it just drops really, really hard. And you’re like, “Huh, that’s weird.”

For some reason investors thought it was negative and then people panic and sell. Here, some traders thought it was positive and people jumped in and it’s this kind of group mentality where it’s self fulfilling prophecy.

The market kind of starts to do based on the initial reaction and then it just continues because that was sort of the initial reaction. It’s a little surprising to me that this is now back at a dollar 84 up only 8%, but that may be because it’s not an official partnership. It’s not an official sponsorship. It was a tweet and that was it. And that might not really materialize. I mean, who knows if that’s going to turn into more sales for the company or maybe it won’t.

So this one’s back down. ADAP over here is up 257%. Again, a little bit of a different type of a trade on ADAP because of course the news was out much earlier in the day and so traders and investors had a lot of time to react to it. But as the momentum starts to increase, traders can start to get more and more aggressive trying to capitalize on these opportunities and that’s where you can see some real volatility.

The good news there is that with volatility comes opportunity and so if you manage your risk, you keep really tight stops and you jump in at low risk pullbacks. Like let’s say right here or right here, then what you’re essentially doing is you’re capping your downside risk and you’re maximizing your potential.

Bottom Line

All right you guys. So I hope you’ve enjoyed this. This is kind of… Just a ended up being a perfect breaking news example. It didn’t end up being my biggest breaking news winner of all time by any means. If it squeezed up to 2.53 and four and kept going, then maybe it would have been. But, nah, it didn’t do that, but doesn’t mean there wasn’t an opportunity to make some money. So as always, questions, comments, leave them right down below. If you want to learn more about my strategy, how I find these stocks and things like that, make sure you check out the link to register to my next webinar, which will be a right down below in the description.

All right, so again, I’ll see you guys for the next episode and questions, comments, leave below. Hey, did you know every morning I go live to stream at pre-market watch list. Subscribe to the channel, press the alert button and you’ll get the notifications. And if you want to learn more about trading, check out the links in the description and if you have questions, post them in the comments because I personally respond to every comment posts on my channel.